Centers for Medicare & Medicaid Services Administrator Mehmet Oz is advancing a proposal to expand catastrophic health plans featuring high deductibles and lower premiums, arguing the approach would broaden choice and reduce monthly costs on Affordable Care Act exchanges.
Under the draft rule issued in February, consumers could access catastrophic plans with deductibles reaching as high as $31,000.
After meeting that threshold, coverage would protect against major medical expenses. The proposal also contemplates multi-year contracts lasting up to 10 years. It must proceed through public comment before finalization.
The framework echoes efforts during the first Trump administration to widen access to short-term health insurance.
Short-term policies operate outside statutory definitions of individual health coverage and therefore do not need to comply with ACA requirements covering essential health benefits, preexisting condition protections or limits on annual and lifetime caps.
Critics warn the new proposal risks replicating those gaps. Essential benefits under the ACA include inpatient and outpatient hospital services, physician care, prescription drugs, maternity coverage and mental health treatment.
Consumer advocates argue removing or weakening these guardrails could expose enrollees to substantial financial risk if serious illness strikes.
The proposal aligns with broader Republican efforts to expand health savings accounts. HSAs allow individuals enrolled in high-deductible health plans to contribute pre-tax funds for medical expenses.
Contributions are tax-deductible, earnings grow tax-free and qualified withdrawals avoid taxation. Bronze and catastrophic plans became HSA-compatible under legislation signed last July.
Supporters view HSAs as a consumer-driven mechanism that pairs lower premiums with tax-advantaged savings.
Approximately 59 mn Americans hold HSAs, according to 2024 survey data. Yet balances vary widely, and health economists note many accounts lack sufficient funds to absorb high-cost events.
During the 2024 campaign, Vice President JD Vance discussed deregulating ACA exchanges and segmenting risk pools. Healthier individuals could enroll in lower-cost high-deductible plans paired with HSAs, while those with chronic conditions would choose more comprehensive coverage.
It remains unclear whether future regulatory changes would affect core ACA protections tied to essential benefits and coverage guarantees.
Public insurance programs such as Medicare, Medicaid and the ACA marketplaces rely on broad risk pooling.
Cross-subsidization between healthy and sick, young and old, higher-income and lower-income participants stabilizes premiums and supports guaranteed issue.
According to Beinsure analysts, expanding high-deductible options without parallel safeguards may reduce premiums for some enrollees while increasing exposure for others, particularly those with limited savings.
